Sept/Oct 2011

Social media and the extrative sector

The changing currency of a modern license to operate

By
C. Horvath

Canadian mining companies generally have a lot of experience in stakeholder engagement, but for some reason – perhaps fear of losing control of the message or concern about getting offside securities regulations – their use of social media to complement traditional engagement methods has, by and large, lagged behind. This gap threatens to undermine the credibility of corporate stakeholder engagement efforts, as stakeholder expectations increasingly shift away from company-controlled communication towards balanced, two-way dialogue in which stakeholders themselves have the opportunity to define both the scope of exchange and the terms by which it is conducted.

Rapid globalization of trade and communications and increasing awareness of humanity’s impact on the Earth are driving a demand for greater transparency, and that is why social media is a game-changer, particularly for the extractive industry. Mobile technologies make it much easier for stakeholders to quickly access information about companies and their behaviour, and social media makes it much easier for stakeholders to share information and their opinions – favourable or not – with their networks. What used to take weeks, or even months, of research and correspondence can now be accomplished in a fraction of the time – the blink of an eye in the timeframe of corporate reputations. Just as news of the Japan earthquake can be tweeted around the world in seconds, so too can any instance of real or perceived corporate wrongdoing.

Balancing risk and opportunity

Social media gives an immediate voice to previously isolated or remote stakeholders, who often come to the social media landscape with disproportionate credibility and trust, due in part to their perceived authenticity. Social networks are typically constructed around existing trust relationships. Moreover, social media allows users to self-organize quickly into communities with shared interests. Trust, which usually takes a great deal of time to build in a traditional engagement, can also be generated very quickly within that on-line community. That trust creates potential for collaboration and action much more quickly than would be possible among strangers or through a traditional engagement.

At the same time, there is very low tolerance among social media users for inauthentic behaviour, whether it comprises inappropriate data mining, breach of privacy or attempts at message control. Unlike traditional media, a company no longer dominates the messaging around its brand on social media. The vast majority of social media content is user-generated, and any attempt to censor or stifle user content is likely to be met with distrust and suspicion, at best, and a significant backlash, at worst.

The scope and norms of the social web that I have described – openness, trust, authenticity – are causing a shift in the way in which we build and maintain social capital: the currency of a modern licence to operate. Stakeholders now increasingly expect corporations not only to communicate their corporate responsibility (CR) initiatives, but also to engage in on-line dialogue about environmental, social and governance issues.

Industry may be tempted to regard these characteristics of social media as risks, and indeed it is easy to take a wrong step. However, the difference between risk and opportunity is largely one of perception and strategy. One of the great opportunities that social media offers is collaboration. Being a constructive and contributing member of the social web not only builds social capital, but also allows a company to engage broad and diverse talent towards the achievement of shared goals.

Consider how Goldcorp and its troubled Red Lake property in northern Ontario were transformed by then-CEO Rob McEwen’s open-source challenge to find new targets and reserve estimates1. Inspired by how Linus Torvalds had shared his code with software developers to develop the world-class Linux operating system, McEwen broke industry convention and posted Goldcorp’s proprietary geological data on the company’s website, offering more than $500,000 in prize money for the best ideas about how much gold was at Red Lake and where to find it. The contest not only led to the discovery of substantial quantities of gold (some eight million ounces, worth over $3 billion), it also exposed the company to new exploration technologies and methods that enabled the company to significantly increase production while lowering costs. Ultimately, tapping into the social web allowed McEwen to transform both the Red Lake property and Goldcorp itself into models of innovation and profitability.

Social media tools make it possible like never before to collaborate with stakeholders throughout the value chain to identify challenges, innovate solutions and achieve sustainability goals. However, to step into this space requires not only the enabling technologies and networks, but a new organizational mindset as well – there needs to be a culture of openness and collaboration that enables a company to look outside of itself for ideas.

Communicating the sustainability message

While social media use by corporations is becoming commonplace, its use for communicating around sustainability and Corporate Responsibility (CR) issues is lagging. The 2010 Social Media Sustainability Index2 (SMI) found that about 85 per cent of almost 300 companies in North America and Europe listed on the Dow Jones Sustainability Index were using social media, but less than half use social media for any sustainability or CR communications, and less than a quarter of them have a dedicated social media channel for sustainability and CR. While mining was not one of the ten sectors examined by SMI, its extractive sector cousin – the oil and gas sector – lagged all sectors in social media use for sustainability communications.

Nevertheless, SMI’s findings seem to be consistent with the Canadian extractive sector landscape. While many companies have a social media presence, only a few of them – typically well-known senior mining companies, such as Barrick, Rio Tinto Alcan and Kinross, but also a handful of juniors, including TVI Pacific – are using these channels regularly to communicate information about their sustainability and CR initiatives. Even so, much of the sustainability content from mining companies tends to focus on community investment programs, without much space given to communicating performance, for better or worse, in other areas.

In the oil sands, the social media landscape again is dominated by the majors, whose content is a mix of investor relations, project updates and community investment news, while the myriad trusts and income funds are next to invisible (indeed, more than one company Twitter feed is entirely blank). One notable exception is Suncor, whose multi-channel presence includes some in-depth sustainability and CR content. Through their Oil Sands Question and Response blog, for example, Suncor is enabling two-way dialogue with stakeholders around some tough issues, such as energy demand, water use and tailings pond reclamation. By focusing on science-based data and expanding the conversation to tackle oil sands issues in a broader societal context, Suncor has created a safe and respectful ground for engagement.

Companies that ignore this opportunity and do not engage in dialogue in social media are increasingly conspicuous in their absence. They are likely to experience declining levels of trust and respect from stakeholders, who are already complementing their own learning, networking and activity with social media tools. In contrast, companies that are actively engaging with stakeholders through social media are building social capital and relationships that facilitate the licence to operate.

1 This information was summarized from the description provided in Wikinomics, by Don Tapscott and Anthony D. Williams, published by the Penguin Group, 2006.